Insignia Financial’s advice overhaul includes new business

The wealth manager will create a new financial advice business as part of an overhaul of its operations.

Wealth manager Insignia Financial is overhauling its financial advice operations to accelerate the business’s growth and return to profitability.

Insignia, previously known as IOOF, will establish a new company called Advice Services Co (ASC) with the goal of creating Australia’s largest adviser-owned licensee group.

The restructure is designed to drive future profit and growth in Insignia’s advice operations, with the company expecting ASC to be profitable in its second year.

Insignia chief executive Renato Mota said ASC will be owned and run for advisers, with the backing and support of the ASX-listed group.

“This is a transformational initiative for our advice offering and will accelerate the return to profitability of our advice business, while ensuring our advice services model is positioned for growth as the financial advice industry continues to evolve,” he said.

The restructure also frees up Insignia, one of Australia’s largest retail superannuation funds, to focus on opportunities flowing from the federal government’s Quality of Advice Review and the introduction of a retirement income covenant requiring super funds to address their members’ retirement income needs.

“The advice space is a very dynamic space at the moment,” Mr Mota told The Australian.

“I think, pleasingly, all constituents recognise the value of advice and see an opportunity to put more advice into the hands of more people. That is a significant opportunity, particularly for an organisation like ourselves which has such deep advice expertise.”

Mr Mota said the advice reset means Insignia can focus on growing its professional services advice businesses, expanding the scope of advice through superannuation, and the development of new technology-enabled advice delivery, partly involving the use of AI.

“The greater focus and specialisation of both organisations will lead to better outcomes for clients, making advice more accessible to more Australians,” he said.

The advice services business, which currently comprises 686 self-employed licensees, who will move to ASC, and 485 self-licensed advisers who remain with Insignia – contributes about $24bn to Insignia’s funds under management.

Insignia will initially own 100 per cent of ASC, but its chief advice officer Darren Whereat said over time it will divest 40 per cent of the assets and share the equity with the self-employed advisers.

“If you think about a professional services model … this is the first, we believe, for the advice profession,” Mr Whereat said.

Insignia is also in talks about the potential sale of its Millennium3 licence, and will return ownership of the Godfrey Pembroke Group to those advisers while retaining a minority stake.

The advice restructure is part of a “strategic refresh” as Insignia enters the final phase of its three-year integration plan following the $1.4bn acquisition of MLC Wealth in 2021.

“We’re now setting ourselves up for that last leg that really will position us as a new type of organisation with some capabilities that play into the trends of the future,” Mr Mota said.

Insignia’s quarterly business update, released on Thursday, showed its funds under management and administration increased by $3.7bn to $295bn as at June 30.

Mr Mota said Insignia achieved its target of positive net inflows for the 2023 financial year.

“We saw continued momentum in flows delivering positive net inflows across both our platform and asset management businesses, bringing full-year net inflows to $667m on a continuing basis.”